BLUE CROSS ASSOCIATION, ET AL., PETITIONERS V. GROUP HEALTH
INCORPORATED, ET AL.
No. 86-1023
In the Supreme Court of the United States
October Term, 1986
On Petition for a Writ of Certiorari to the United States Court of
Appeals for the Second Circuit
Memorandum for the Federal Respondent
Petitioner challenges the court of appeals' holding that it lacked
jurisdiction to entertain an interlocutory appeal from an order
denying a claim of official immunity.
1. Petitioner Blue Cross/Blue Shield of Greater New York (Blue
Cross), a private, non-profit organization, acts as a "fiscal
intermediary" between the suppliers of medical care and the Secretary
of Health and Human Services (HHS) in the administration of the
Medicare Program. Such intermediaries, although nominated by
providers of health services, enter into agreements with the Secretary
and act on his behalf in certain respects. See 42 U.S.C. (& Supp. II)
1395h; 42 C.F.R. 421.5(b). Intermediaries audit the provider's cost
reports and pay the provider for services supplied to Medicare
beneficiaries. Intermediaries also offer "a channel of communication
from providers to the Secretary." 42 U.S.C. 1395h(a)(2)(A). In
particular, HHS regulations mandate that "(i)n the interpretation and
application of the principles of reimbursement, the fiscal
intermediaries will be an important source of consultative assistance
to providers and will be available to deal with questions and problems
on a day-to-day basis." 42 C.F.R. 405.406(b) (1985). The ultimate
resolution of reimbursement disputes rests with the Secretary, however
(see 42 C.F.R. 405.1885); an intermediary thus acts only as a
"conduit" for information, and cannot resolve policy questions. See
Heckler v. Community Health Services 467 U.S. 51 (1984). /1/
2. Respondent Group Health, Inc. (GHI) is a non-profit health
services corporation and a provider of health care under the Medicare
Program. Blue Cross serves as its fiscal intermediary. Pet. App. A6.
In 1974, GHI asked Blue Cross whether interest expenses associated
with GHI's purchase of Hillcrest Hospital would be reimbursable under
Medicare. Despite reservations about the transaction, Blue Cross
responded affirmatively. After its purchase by GHI, Hillcrest
accordingly included the interest expenses in its annual Medicare
reports. In a 1977 audit, however, Blue Cross discovered that
Hillcrest had not in fact made interest payments to GHI in 1974 or
1975, and it referred the matter to the Secretary. Id. at A6-A7. The
Secretary in turn determined that Hillcrest's interest payments, even
if made, would not be reimbursable under Medicare. /2/ GHI's
challenge to this determination was rejected by the HHS Provider
Reimbursement Review Board and by the courts. Id. at A7-A8.
3. GHI then brought this common law tort suit against Blue Cross,
alleging that Blue Cross had been negligent in failing to consult the
Secretary before answering GHI's query; that Blue Cross had been
negligent in stating that the Hillcrest interest payments were
reimbursable; and that Blue Cross had misrepresented its authority to
act as the Secretary's agent. /3/ Blue Cross and the Secretary
responded by seeking summary judgment, arguing, among other things,
that the suit should be dismissed on official immunity grounds. The
district court denied the summary judgment motion (Pet. App. B1-B24).
The court reasoned that Blue Cross could not be deemed a federal
official for immunity purposes (id. at B19) and that, even if it
could, the existence of disputed questions of fact about "the scope of
(Blue Cross's) authority" would likely preclude summary judgment (id.
at B20).
When Blue Cross and the Secretary attempted to appeal the denial of
the immunity claim, the court of appeals dismissed for lack of
jurisdiction (Pet. App. A1-A13). The court acknowledged both that a
district court's order denying an immunity claim may be treated as an
appealable collateral order (id. at A11), and that Blue Cross had
"alleged a nonfrivolous claim that fiscal intermediaries in the
Medicare program are entitled to official immunity" (id. at A12). But
the court offered two independent reasons for concluding that Blue
Cross's claim nevertheless was not appealable. First, the court held
that "the immunity question cannot be decided without addressing GHI's
underlying claims on the merits, including such essential and disputed
questions of fact as, for example, whether Blue Cross acted within the
scope of its authority. At this stage of the litigation the immunity
issues presented are not solely questions of law." Ibid. Second, the
court noted that GHI has an outstanding claim against the Secretary
under the Federal Tort Claims Act (FTCA); the court therefore
concluded that "to force GHI to litigate its claims against Blue Cross
and the government separately when the claims and factual issues are
'but a single controversy' results in an inefficient use of judicial
resources" (ibid).
4. The court of appeals' conclusion that it lacked jurisdiction to
hear the appeal appears to be incorrect, in view of this Court's
repeated holdings that orders denying motions to dismiss suits on
official immunity grounds are immediately appealable as collateral
orders. See generally Mitchell v. Forsyth, 472 U.S. 511 (1985);
Nixon v. Fitzgerald, 457 U.S. 731 (1982). But because the court of
appeals based its holding, at least in part, on a factual conclusion
-- albeit, in our view, an erroneous factual conclusion -- we
determined not to seek certiorari.
a. In dismissing the appeal, the court below first stated that it
could not decide the immunity question without addressing the merits
of GHI's claims, and particularly without determining whether Blue
Cross acted within the scope of its authority when it responded to
GHI's query. It is well-settled, however, that an official is
entitled to immunity in a common law tort suit so long as the
challenged conduct fell within the outer bounds of his
responsibilities. See Butz v. Economou, 438 U.S. 478 (1978); Barr v.
Mateo, 360 U.S. 564 (1959). And there is no doubt that Blue Cross's
conduct more than satisfied that standard. It is undisputed that Blue
Cross did nothing more than answer GHI's question about the
significance of the Hillcrest interest payments, an action that, on
its face, fell within Blue Cross's regulatory obligation "to deal with
(provider) questions and problems on a day-to-day basis." 42 C.F.R.
405.406(b)(1985). Of course, GHI may well be correct in asserting
(Br. in Opp. 17-18, 23-24) that Blue Cross's answer to its question
was incorrect, that Blue Cross lacked the authority to bind the
Secretary, and that Blue Cross should have consulted the Secretary
before issuing its response. See Community Health Services, 467 U.S.
at 57, 64-65. But Blue Cross's action surely fell "within the outer
perimeter" of its official duties. Barr, 360 U.S. at 575 (plurality
opinion). /4/
The court of appeals' alternative rationale for dismissing the
appeal -- that judicial economy would be served by allowing GHI's
claim against Blue Cross to proceed to trial along with its related
FTCA action against the government -- also is without merit. This
Court has explained that "the denial of a substantial claim of
absolute immunity is an order appealable before final judgment, for
the essence of absolute immunity is its possessor's entitlement not to
have to answer for his conduct in a civil damages action." Mitchell,
472 U.S. at 525. See generally Abney v. United States, 431 U.S. 651,
659 (1977). The Court also has made it clear that "a claim of
immunity is conceptually distinct from the merits" (Mitchell, 472 U.S.
at 527). Implicit in these conclusions is the Court's judgment that
the policy against "piecemeal appeals," and associated concerns with
the conservation of judicial resources, must be subordinated in cases
raising claims of immunity. The court of appeals' contrary ruling
here simply disregarded the analysis used in this Court's immunity
decisions.
b. Having said that, we nevertheless concluded that a petition
seeking review of the decision below was not warranted. The court of
appeals reasoned that Blue Cross's immunity claim required a
consideration of disputed questions of fact concerning the scope of
Blue Cross's authority. Had the court been correct in that judgment,
it also would have been correct in declining to grant the immunity
claim. See Williams v. Collins, 728 F.2d 721, 726 n.7 (5th Cir.
1984); Evans v. Dillahunty, 711 F.2d 828, 830 (8th Cir. 1983). /5/
And while, in our view, the court's factual judgment was incorrect, an
interlocutory error of that sort in an unreported opinion does not
merit this Court's consideration.
We also note that -- despite the confusion evidenced by the court
of appeals' alternative, "judicial economy" ground for dismissing the
appeal here -- the law concerning the appealability of orders denying
claims of official immunity is well-settled. As we explained above,
this Court has held on several occasions that such orders are
immediately appealable. For their part, the courts of appeals have
not expressed doubt about that proposition. See e.g., Heathcoat v.
Potts, supra; Krohn v. United States, 742 F.2d 24 (1st Cir. 1984);
Chavez v. Singer, 698 F.2d 420 (10th Cir. 1983); Evans v. Dillahunty,
supra. Indeed, the Second Circuit itself recently held that an order
denying a summary judgment motion asserting claims of absolute and
qualified immunity is immediately appealable. Barrett v. United
States, 798 F.2d 565 (2d Cir. 1986). In these circumstances, the
government concluded that a petition asking this Court to revisit the
issue would not be warranted.
Respectfully submitted.
CHARLES FRIED
Solicitor General
FEBRUARY 1987
/1/ Because the intermediary is the agent of the Secretary, (see 42
C.F.R. 421.5(b)) agreements between intermediaries and the Secretary
provide for indemnification of any intermediary "with respect to
actions taken on behalf of the Administrator (of the Health Care
Finance Administration, the Secretary's designee)." Such
indemnification agreements also declare that "(n)o individual
designated * * * as a certifying officer shall, in the absence of
gross negligence or intent to defraud the United States, be liable
with respect to any payment certified by him (pursuant to this
agreement)." See 42 U.S.C. 1395h(i)(1). HHS regulations provide that
the Secretary, and not the intermediary, is the real party in interest
in litigation involving actions taken by an intermediary while
representing the Secretary. 42 C.F.R. 421.5(b).
/2/ HHS concluded that GHI's purchase of Hillcrest was not
reimbursable for two reasons: because it was an investment rather
than a loan (see 42 C.F.R. 405.414(a)(8) and 405.429 (1985)) and
because GHI and Hillcrest were related entities (see 42 C.F.R.
405.419(3)(c) (1985)). See Pet. App. A7.
/3/ The action was removed from state to federal court, and the
Secretary was permitted to intervene to protect the interests of the
intermediary, his agent. See Group Health, Inc. v. Blue Cross Ass'n,
587 F. Supp. 887 (S.D.N.Y. 1984).
/4/ While GHI clearly is correct in stating (Br. in Opp. 13-14)
that Blue Cross is not a federal official, it also is clear that Blue
Cross is entitled to official immunity. Fiscal intermediaries act "on
behalf of" the Secretary under 42 C.F.R. 421.5(b), are indemnified by
the Secretary (see 42 U.S.C. 1395h(i)(2)) and are an integral part of
the Medicare program (see 42 U.S.C. (& Supp. II) 1395h). Indeed,
courts have held that an independent contractor hired by a fiscal
intermediary should be deemed a governmental agent for immunity
pruposes. See Bushman v. Seiler, 755 F.2d 653 (8th Cir. 1985).
/5/ We note, however, that the court of appeals may have erred in
the manner in which it disposed of the immunity claim. Here, the
court held that it lacked jurisdiction to entertain Blue Cross's
appeal. In contrast, other courts of appeals have suggested that,
when the facts supporting an immunity claim are in dispute, an
appellate court should find jurisdiction to entertain the appeal and
resolve the case by ruling that the existing record simply does not
support the claim of immunity. See Heathcoat v. Potts, 790 F.2d 1540,
1542-1543 (11th Cir. 1986). But there is no practical difference
between such a ruling and the court's refusal to accept jurisdiction
here; in either situation, the case returns to the district court for
factual development on the immunity claim. See Williams, 728 F.2d at
726 n.7.